That kind of HARP was created by the Feds to help those who are underwater or close to it, refinance with today’s rates. For people like my wife who bought in 2003 or me who bought in 2005, this program represents a great opportunity. Due to the drop in housing prices, many of us have no equity and 6% interest rates. This is a double whammy. With no equity, lenders wouldn’t consider refinancing under today’s low rates. The person buying now can get a similar condo to the one I bought in 2005 for about 30%, at a 30-year fixed interest rate of 3.5%.

We put down 20% and could make the payments, but being responsible worked against us when we tried to take advantage of refinancing under the recent low interest rates. Mortgage lenders only wanted to reduce rates on people who were behind on payments. It lead me to write “Lower the Interest Rate on Your Mortgage Without Refinancing?” more than three years ago.

This past December I thought I had it all figured out, I was going to use a HARP to Save Money with a HARP-Refinance on an Investment Property. It would bring down from a 5.875% rate to a 5.04% rate. At the time, it looked like it was going to save me $250 a month, which is huge. Then I realized there was there was something that they left out. It should have been obvious, but I would be taking a 30-year mortgage that I’m already 7 years into and reset it to 30-years again. While the rate is cheaper and there would be still some savings, most of the savings came from spreading the mortgage over a longer period. I tried to pursue a 15-year mortgage, but at the time HARP mortgages would only allow you to refinance to a lower monthly payment (the point was to save people money). With the refinance costs on top of that, I decided that wasn’t right for me and pushed the mound of paperwork into the trash.

A few weeks ago, I noticed that interest rates had continued to drop even further. This time I called up USAA, which is my bank of choice, and ask them about my options for refinancing. It never hurts to ask, right? It turns out that their underwriters don’t do condominiums that are investment properties, but they have a partnership with Wells Fargo to cover that exact scenario. I met all the requirements for the newest version of HARP (they seem to be pushing out updated legislation every 6-9 months lately), and that allowed me to get into a 15-year mortgage at 3.5%… amazing for an investment property at nearly 100% Loan to Value (LTV). The monthly payments would be almost exactly what I am paying now. This may not seem like a bit deal, but I’ll cut 8 years off of paying a mortgage.

Next up, I asked about my wife’s mortgage. She was told previous that because her loan wasn’t serviced by Fannie Mae or Freddie Mac, she wouldn’t qualify for a HARP. However, I figured that once again, it wouldn’t hurt to ask. Also, since she didn’t buy at the exact top of the market she was close to 80% LTV allowing for a traditional refinance. It turns out that whatever information she was given before wasn’t correct or no longer applicable. Her property qualifies as well. She only has 21 years of mortgage payments, but she’ll save a little money each month in addition to eliminating 6 years of mortgage payments.

It seems like a lot of people could benefit if they knew about the HARP program. Maybe it is just me, but I’ve found that very few organizations are actively publicizing it.

Take a minute and imagine what your life might be like if you had your next 96 payments of your mortgage covered… now double that. Certainly beats the pants off of a double rainbow! The only downside is that it is A LOT of paperwork. They are also saying that I might need to get additional flood insurance reminiscent of the time I almost got tricked into buying flood insurance I didn’t need.

Three years ago when I wanted to refinance the rates were at 4.875%. In December I almost refinanced at 5.04%. It seems like good things come to those who wait.

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Comments

We almost were able to refinance about 4-mos ago, but it seems in CA if you don’t meet certain LTV requirements, your property tax payments have to be part of the loan. My income varies month to month and I couldn’t afford $400 to $500 being tacked on.

But, USAA is also my bank so I’m going to try again. Like you said, it doesn’t hurt to ask.

I’m refinaning the house that I live in, and locked down a 15 year for 2.75%. I’m 4 years in to a 30 that’s at 4.5% (was at 6.5% originally in 2008). Rates are crazy low! In fact, the new payment with PITI is the same as the orignal 30 year. I’m hoping that I’m as close as I think I am to the 78% LTV mark, but the new amortization gets me there quickly if not. Feeling pretty good, except I have put a lot in to this house and 17k is still on low interest credit. I’m so glad I found this blog recently. Finance isn’t a subject that many of my local friends like to talk about but I need the inspiration of others to stay the course. Thanks!

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